Presentation Transcript

Fiscal Policy and Budget :

Fiscal Policy and Budget Presented By: Group 4 (Roll. No 46-60)

Fiscal Policy-Meaning :

Fiscal Policy-Meaning The word fisc means ‘state treasury’ and fiscal policy refers to policy concerning the use of ‘state treasury’ or the govt. finances to achieve the macroeconomic goals.
“any decision to change the level, composition or timing of govt. expenditure or to vary the burden ,the structure or frequency of the tax payment is fiscal policy.” - G.K. Shaw

Objectives of Fiscal Policy :

Objectives of Fiscal Policy It has 2 major objectives:
GENERAL obj-. aimed at achieving macroeconomic goals
SPECIFIC obj-. relating to any typical problems of an economy

Fiscal Policy And Macroeconomic Goals :

Fiscal Policy And Macroeconomic Goals Economic Growth: By creating conditions for increase in savings & investment.
Employment: By encouraging the use of labour-absorbing technology
Stabilization: fight with depressionary trends and booming (overheating) indications in the economy
Economic Equality: By reducing the income and wealth gaps between the rich and poor.
Price stability: employed to contain inflationary and deflationary tendencies in the economy.

Instruments of Fiscal Policy :

Budgetary surplus and deficit :

Budgetary surplus and deficit “A budget is a detailed plan of operations for some specific future period”
Keeping budget balanced (R=E) or deficit (R<E) or surplus (R>E) as a matter of policy is itself a fiscal instrument.
An accumulated deficit over several years (or centuries) is referred to as the government debt
A deficit is a flow. And a debt is a stock. Debt is essentially an accumulated flow of deficits

Government Expenditure :

Government Expenditure It includes :
Government spending on the purchase of goods & services.
Payment of wages and salaries of government servants
Public investment
Transfer payments

Public debt :

Public debt Internal borrowings
Borrowings from the public by means of treasury bills and govt. bonds
Borrowings from the central bank (monetized deficit financing)
External borrowings
foreign investments
international organizations like World Bank & IMF
market borrowings

BUDGET :

BUDGET “A budget is a detailed plan of operations for some specific future period”
It is an estimate prepared in advance of the period to which it applies.

Sticking to FRBM Targets :

Thank You :

Thank You “We need faster growth because, at our level of incomes, there can be no doubt that we must expand the production base of the economy if we want to provide broad-based improvement in the material conditions of living of our population, ..........
But growth alone is not enough if it does not produce a flow of benefits
that is sufficiently wide-spread. We, therefore, need a growth process that is much more inclusive, .......... and which also ensures access to essential services such as health and education for all sections of the community”.
-Dr. Manmohan Singh,
Prime Minister